GillianTan

The Wall Street Journal reported Wednesday that Post was nearing the deal. Michael Foods' private-equity owners have been running an auction for the company during which Tyson Foods Inc. and others bid, according to people familiar with the matter. But Post emerged the winner.

The transaction is expected to close in the second quarter. Michael Foods will continue to operate independently under its current management team.

With slack consumer spending and a broad shift toward fresher grocery items, packaged-food companies are under pressure to bolster their bottom lines in various ways. Brazilian private-equity firm 3G Capital has jolted the industry by slashing costs at H.J. Heinz Co. since it teamed up last year with Berkshire Hathaway Inc. for a buyout of the ketchup company, and activist investors have targeted other big food makers including Mondelez International Inc.

While some companies have been streamlining operations by selling off brands, St. Louis-based Post has been on a spending spree to diversify its offerings since it was spun off from Ralcorp Holdings Inc. in 2012. Best known for its Fruity Pebbles and Honey Bunches of Oats cereals, it has added protein bars, peanut butter and pasta products in the past year.

Post has identified acquisitions as a key part of its strategy. Chief Executive Bill Stiritz, a veteran in the consumer-goods industry, has focused on the rapidly growing areas of natural and organic foods.

The deal for Michael Foods represents Post's biggest acquisition, nearly doubling its size. Post, whose market value is about $2 billion, reported sales of $1 billion and earnings of $9.8 million for the fiscal year ended Sept. 30. But Post investors appear to like the idea of the purchase, sending the stock up 5.7% to close at $54.73 Wednesday after The Wall Street Journal reported the potential sale.

Based in Minnetonka, Minn., Michael Foods, which traces its roots to 1908, produces and distributes food products including Abbotsford Farms eggs, Simply Potatoes, Crystal Farms cheeses and liquid egg whites. It reported total sales of $1.95 billion and earnings of $50.4 million for the year ended Dec. 28. It had $1.2 billion of debt as of that date.

Michael Foods is owned by the buyout arm of Goldman Sachs Group Inc. and Thomas H. Lee Partners LP. The Goldman unit bought a majority stake in Michael Foods in 2010 from TH Lee, which retained a roughly 20% stake. That deal valued the company at $1.7 billion including debt.

Part of the attraction for Post was a change in consumer eating habits, said a person familiar with the matter. Post's cereal business has struggled as consumers choose more portable, less carbohydrate-heavy breakfast items. The company has said the Attune Foods and Hearthside's Golden Temple granola businesses it bought last year, which put Post into the natural foods aisles, are experiencing high-single-digit growth, and that its later purchase of Premier Nutrition Corp. gives it access to the double-digit growth in the sports nutrition and weight-loss category.

Some companies are narrowing their focus instead of diversifying. Nestlé SA agreed to sell its PowerBar brand to Post earlier this year, and sold its Jenny Craig brand to a private-equity firm in 2013. Procter & Gamble Co. last week announced the sale of its pet-food business to Mars Inc.

Last year's acquisition of Heinz shook the packaged-food business, and has fueled expectations that more big deals in the industry could be in the works.

Earlier this month, shares in Kellogg Co. surged by their biggest one-day gain since 2009. Analysts credited speculation that the company may be the industry's next takeover target. The shares remain up about 8.3% over the past month. Kellogg has declined to comment.

Dana Mattioli and Ben Fox Rubin contributed to this article.

Write to Gillian Tan at gillian.tan@wsj.com, Ryan Dezember at ryan.dezember@wsj.com and Annie Gasparro at annie.gasparro@wsj.com

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